UK Finance has released its latest monthly summary of debit and credit card spending by UK consumers. The August data continues to show that debit card spending is up on last year, while credit card spending is down.
Laith Khalaf, financial analyst at AJ Bell, comments on the latest data:
“The latest card spending figures show the summer boom in full swing, as consumers came out of lockdown to spend their money in pubs, shops and restaurants. It’s encouraging that the spending splurge was driven by debit card payments rather than credit card borrowing, meaning there will be less of a debt hangover to worry about.
“Indeed credit card balances have fallen 12.6% over the last twelve months, as some consumers have found themselves flush with cash, because for large parts of the year they’ve had little to pay for apart from groceries, utility bills, and a Netflix subscription.
“Credit balances have also fallen because quarantine rules put the brakes on holidays abroad, which are often paid for on credit because of the size of the transaction and the additional protections afforded by paying on a credit card.
“Robust consumer spending and lower levels of debt are good for the UK economy as a whole. However the financial benefit from the imposed frugality of lockdown has not been shared equally, with many people struggling to make ends meet as a result of the pandemic.
“FCA figures released last month revealed that in total 12 million UK adults had low financial resilience, with 2 million joining that group since February. If you’re struggling to pay your debts, the worst thing you can do is stick your head in the sand and hope they go away - unfortunately they will just get bigger. The first step to getting on top of your debts is itemising what you owe and what the interest payments are, then wherever possible paying off the most expensive debt first.
“Those who have been lucky enough to benefit financially from lockdown should hang onto some of their savings for a rainy day. While there was an economic recovery as the UK opened up over the summer, new COVID restrictions could prompt another slowdown in the short term. Of course, recent progress on vaccines hopefully means we can look forward to the back end of next year with more optimism.”
